Judge tosses out McPier suit against Uber, Lyft

The agency that runs McCormick Place is going back to the drawing board to collect airport pickup taxes from Uber and Lyft after a judge threw out its lawsuit against the companies.

In a move the Metropolitan Pier & Exposition Authority hopes will help it recover a chunk of its tax revenue, the agency this month asked the city of Chicago to audit the two ride-booking companies and tell them they must pay the airport departure tax, a $4 fee for every pickup at O'Hare and Midway.

The agency should have done that before suing the companies more than a year ago for their refusal to pay the tax, Cook County Judge Ann Collins-Dole ruled last month. She dismissed McPier's complaint because the agency did not follow its own legal procedure for notifying a taxpayer that it owes the agency money.

The state law allowing McPier to collect the tax, she ruled, also dictates that the agency must provide written notice to those that haven't paid and that any delinquent taxpayer is entitled to a hearing. The agency skipped those steps because its officials thought case law suggested it didn't have to take them, said McPier General Counsel Darka Papushkewych.

As a result, the agency is now going through that process by turning to the city, whose revenue department collects the tax from cabs and livery services and passes it on to McPier.

A spokeswoman for the city's budget office said the city has said it will audit the transportation network providers—or TNPs, as the city calls them—but that the audit is not yet underway.

Collins-Dole's ruling (read it below) did not address whether companies like Uber and Lyft are subject to the tax, as McPier claims. That question could make its way back into court if the TNPs maintain the tax doesn't apply to them.

Uber spokeswoman Molly Spaeth said in a statement that the company is "pleased with the court's decision in this matter as ride-share customers in Chicago already pay some of the highest fees in the country," adding that it "would love to work with MPEA collaboratively on ways to boost convention and tourism business in Chicago."

A spokeswoman for Lyft did not respond to a request for comment.

At issue in the dispute is a significant chunk of tax money that McPier relies on to meet its debt obligations at the convention center.

Through April, airport departure tax receipts at McPier were down nearly 12 percent year-over-year to just less than $7 million. The tax generated $9.6 million last year for the agency, accounting for about 6.5 percent of McPier's tax revenue for the year.

The rest of its tax proceeds come from levies on hotels, food and beverage sales and automobile rentals, which combine to make payments on McPier's $3.5 billion of long-term debt. All of those tax sources are up year-over-year, putting the agency on pace to finish its current fiscal year with 5.3 percent more than it needs to cover its next debt payment.

PAYING A DIFFERENT TAX

Part of the reason Uber and Lyft contend they don't owe McPier the airport departure tax is that they already pay such a fee to the city that taxis and livery don't.

That's because the city reached a deal with the TNPs in November 2015 and adopted an ordinance under which it would collect $5 for every TNP airport pickup.

But instead of passing that fee on to McPier as it does with the taxi collections, the city pockets that money and said in late 2015 that the dispute over the airport departure tax is between McPier and the TNPs only, not the city. It expects to pull in $54 million from all ground transportation taxes next year, according to its 2017 budget.

But if the city says the TNPs owe the McPier tax and also continues to enforce its $5 fee, it will be asking them to pay $9 per airport pickup—a prospect that doesn't sit well with the TNPs.